Advice delayed on U.S. health insurer spending

Mon May 24, 2010 12:56pm EDT

* NAIC says final recommendation now likely in July

* Insurance spending proposal had been expected June 1

WASHINGTON May 24 (Reuters) - State insurance regulators say they will need more time to produce their recommendation on an issue at the center of the debate over how U.S. health insurance companies spend their customers' dollars.

The National Association of Insurance Commissioners (NAIC) was asked to deliver their recommendation on how to define medical expenses versus administrative spending by June 1, but now say it will take at least another month to deliver a detailed response.

NAIC said in a statement on Monday that it would respond to U.S. Health Secretary Kathleen Sebelius by June 1 but it "will not include the final definitions and calculation methodologies." The group said no date had yet been set, but a spokesman said the goal was July 1.

Under the recently passed health care reform law the medical loss ratio is limited under the law. Starting in 2011, large health insurance plans must spend at least 85 cents of every premium dollar on actual medical care while small or individual plans must spend at least 80 cents on the dollar.

The ratio is closely watched by investors as a key sign of potential profitability and monthly premium rates.

The health reform law gave NAIC until the end of the year to provide their recommendation but the group was asked by federal regulators to produce it by June 1.

The debate over how to define medical spending has thrust the little-known NAIC into the spotlight.

At issue is whether certain services such as nurse hotlines and electronic medical records are considered crucial to providing better care or administrative programs aimed at reducing an insurer's costs.

Companies have urged the NAIC to adopt broad definition to give them flexibility, while consumer groups want to see tight definitions to assure that services are aimed a benefiting patients, not insurers' bottom lines. (Reporting by Susan Heavey; Editing by Tim Dobbyn)

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